Blogging the CEA Report: What's Up With Medicare?

You've heard, by now, the constant refrain that entitlement reform is health reform. This next graph, also from the Council of Economic Advisers health care report, helps show why:

Two lines there. The one that shoots upwards shows the cost growth of Medicare and Medicaid. There will be no money left to fund any other priorities if trends continue. The bottom line -- the one that rises at a gentler and more manageable rate -- shows cost growth if this were just about the Baby Boomers retiring. It shows cost growth, in other words, if this were about entitlement programs rather than health care costs.

Medicare and Medicaid are becoming unaffordable because purchasing things made by the health insurance industry is becoming unaffordable. The problem is much the same for individuals in private health insurance. It's not obvious to me that health care reform, as it's currently being debated, will actually fix the entitlement problem. But what is clear is that you can't fix the entitlement problem without real health care reform.

(For the summary post on the CEA report, click here. For the post on its link to wages, click here.)

Get me Jules Vernes, please! Or do we really need LBJ? Actually a large dose of both.

Per capita GDP grows about 20% every decade, ergo, three decades out per capita GDP should have reached (normal expectations) about 175% of today's level. Don't want to pay a measly 8% more of a that much multiplied GDP (14% of today's) for 30 years more progress in medicine?

Actually, if things keep on going the way they have in the American labor market, we, most of the people, may not be able to afford the taxes to pay for it. Suppose, 25% of the workforce were still earning less than the minimum wage -- as it was up until two years ago -- the minimum of 1968 that is (LBJ's min $10/hr adjusted for inflation) or some situation similar? Suppose the top 1% continue to gloam up an outrageous share of economic growth until some situation similar to 2006 still holds: when average top 1% of household income, $1.2 million dollars (not your family doctor)?

This did not happen in Europe because European labor makes use of the VOTE to take care of itself by instituting sector-wide labor contracts, etc. American labor relies on what New Gingrich would prefer them to rely on: that old "hidden hand."

Noto bene:15% of overall American (not European) income share shifted from the bottom 90% of earners to the top 1% between 1973 (the last year of high productivity -- aren't we having another discussion about that?) and the present. 15% of GDP is used up for all present health costs: public and private paid. Could getting that income share back be core, central, the alpha and omega of paying for health care?

O.K., I guess you don't read my post, so rather than repeat myself, I'll just quote Uwe Reinhardt to, but the point is, YOU ARE LOOKING AT THE WRONG STATISTIC!!!

"If "economic sustainability," then exactly what do people have in mind with that phrase? During the past 4 decades or so, the long-run, smoothed average annual growth rate in real (inflation-adjusted) GDP per capita has been about 2%. Suppose that fell to only 1.5% for the next four decades. The current average real GDP per capita of about $40,000 would then grow to about $72,500 by 2050 in constant-dollar terms. Medicare now absorbs about 3% of GDP, leaving a non-Medicare real per capita GDP of $38,800. It was estimated by the CBO about a year ago that Medicare will absorb about 9% of GDP by 2050. Let’s make that 10%. At these numbers, the non-Medicare real GDP per capita available to today’s little critters who will run America in 2050 will still be close to 70% larger than is our current non-Medicare GDP per capita."

O.K., I guess you don't read my post, so rather than repeat myself, I'll just quote Uwe Reinhardt to, but the point is, YOU ARE LOOKING AT THE WRONG STATISTIC!!!

"If "economic sustainability," then exactly what do people have in mind with that phrase? During the past 4 decades or so, the long-run, smoothed average annual growth rate in real (inflation-adjusted) GDP per capita has been about 2%. Suppose that fell to only 1.5% for the next four decades. The current average real GDP per capita of about $40,000 would then grow to about $72,500 by 2050 in constant-dollar terms. Medicare now absorbs about 3% of GDP, leaving a non-Medicare real per capita GDP of $38,800. It was estimated by the CBO about a year ago that Medicare will absorb about 9% of GDP by 2050. Let’s make that 10%. At these numbers, the non-Medicare real GDP per capita available to today’s little critters who will run America in 2050 will still be close to 70% larger than is our current non-Medicare GDP per capita."

Take that plot and remove costs incurred in the last two months of life.

Try removing costs incurred by those with diabetes.

The way to contain Medicare costs is to get smart about how we spend our dollars. We love Grandma and want her to live forever, but we also spend tons of money on her last few days -- she would have rather gone to Disney World when she had good health!